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Saturday Quiz – June 30, 2012

Welcome to the Billy Blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.

1. If the share in national income that workers receive (the wage share) falls then their real standard of living is reduced.

2. If workers succeed in gaining real wages increases then, other things equal, the share of profits in national income is squeezed.

3. Modern Monetary Theory (MMT) does not deny that government spending can crowd out private spending.

4. The government has to issue debt if the central bank is targetting, say a 2 per cent short-term interest rate and declines to pay a return on excess bank reserves.

5. Premium Question: Suppose that the government announced it intended to cut its deficit from 4 per cent of GDP to 2 per cent in the coming year and during that year net exports were projected to move from a deficit of 1 per cent of GDP to a surplus of 1 per cent of GDP. If private sector deleveraging resulted in it spending less than it earned to the measure of 5 per cent of GDP, then the fiscal austerity plans will undermine growth even if the net export surplus was realised.

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    This Post Has 4 Comments
    1. Even a broken clock tells the time twice a day.

      The real challenge is to go 5/5 twice in a row – still trying after two and a half years.

    2. Q4, What if the govt did not run a deficit? If the govt was removing excess reserves through taxation it would not have to issue debt. The question assumes a deficit.

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